ENERGY GUEST BLOG -- HEIDI GOROVITZ ROBERTSON

Ohio laws allow drillers access to land, at times over landowner objections

Blog Entry: May 03, 2013 8:46 AM | Author: HEIDI GOROVITZ ROBERTSON

Heidi Gorovitz Robertson is a professor of law and associate dean for academic enrichment at the Cleveland-Marshall College of Law. She is also a professor of environmental studies at the Maxine Levin College of Urban Affairs at
Cleveland State University.

There is an ironic juxtaposition at play in Ohio concerning the fundamental right of property owners to control the use of their land.

Ohio land owners, as a group, are of two minds about this right, at least when it comes to land atop shale oil and gas. Many property owners believe they should have the right to use their land as they please — that is, to lease drilling rights to potential shale oil and gas developers, or to have their land included in a drilling unit. After all, it's their land. They should have the right to make that decision.

But what if they want to exercise their right to control the use of their land in a different way? What if the landowner wants his land not to be used for shale oil and gas development? Would a landowner have the right to make that decision as well?

Actually, not necessarily.

Two relatively old legal mechanisms called “mandatory pooling” and “forced unitization” allow drilling operators to access minerals beneath private property, even when a landowner objects. Effective since 1965, Ohio's mandatory pooling and unitization laws effectively negate a landowner's ability to decide whether or not drilling will occur beneath his land. And Ohio is not alone.

To date, at least 38 states have enacted some version of these laws. The specific rules vary somewhat by state, but the bottom line is the same. Drillers generally can get permission to extract minerals from beneath a defined area if leases to do so have been negotiated with neighboring landowners for a specified percentage of that land. The company then can harvest oil or gas from the entire area, despite the disagreement of a landowner within that area.

Here's how it works in Ohio: Drilling units have to meet an acreage requirement, which with respect to vertical shale drilling is not usually a problem. When using horizontal drilling, however, they also need to establish a drilling unit of sufficient size and shape to effectively use the technology and meet industry standards. The technology requires substantial space to function efficiently, so industry best practices call for drilling units of 640 acres. That's a lot of land and operators cannot always get that much land under lease to create an appropriate drilling unit. But never fear. The developer does not actually need to secure rights to the entire unit.

There may well be a landowner within that proposed unit who objects, as suggested above. But that's basically too bad. A group of landowners can apply to the Ohio Department of Natural Resources to have a prescribed area defined as a drilling unit if at least 65% of the tract owners within the proposed unit agree to participate. If ODNR agrees, a drilling unit is created, including the tract belonging to the dissenting landowner. The oil and gas developers then can drill horizontally beneath the entire drilling unit, in compliance with the applicable regulations and industry best practices, despite that tract owner's objection.

To the objecting landowners, this sounds nuts. They firmly believe they should have the right to decide whether their land is included in a drilling unit, or not.

So what's the rationale for allowing the operator to proceed without this landowner's consent? The answer lies in the correlative rights doctrine.

Put simply, if the objecting landowner is allowed to prevail – because withholding his consent would render the area too small or misshapen to satisfy either state regulations or industry best practices — he could prevent the development of a parcel.

The landowners who agreed to lease their land for oil and gas development, or include it in a drilling unit, would be effectively barred from developing the resources that lie beneath their land. One landowner, by refusing to participate, could control the rest of the landowners and essentially block the development of the underground resource. The correlative rights doctrine protects the rights of the agreeing landowners to develop the oil and gas resources beneath their land, despite their neighbor's objection. When applied in Ohio, the correlative rights doctrine outweighs the objecting landowner's right to deny the inclusion of his land within the defined parcel.

Fundamentally, at play in Ohio is a tension between the property owner's right to make individual decisions regarding the use of privately owned land and the correlative rights of neighboring land owners who would like to develop the oil and gas resources beneath their land. Currently, Ohio law favors correlative rights, and most Ohio citizens are not even aware of the conflict.

As Ohio develops its shale oil and gas industry, however, this tension may well be thrust into the limelight and it will be interesting to see where public opinion falls.

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